A Thorough Guide Simulated Stock Trading

Have you ever heard of simulated stock trading? If not, you could be missing out on a great opportunity to try your hand at the market, test strategies, and figure out a way to beat the market at its own game – earning a profit.

The best part? You can do all of this without any risk. Learning without risking your money is a priceless opportunity, and with stock trading simulations, you can do just that. I’ll cover the important, must-known aspects of simulating the market, including how you can get started and how it can benefit you.

Simulating Stock Trading

A stock trading simulation is basically a game using real-life stock market data, companies, and metrics. The purpose is to give traders the chance to test strategies, learn about the market, and practice using analytical measures and fundamental and technical analysis – all without having to use any real money to fund an account and trade. The end result is that you can play the market without any of the risk associated with real money.

For example, let’s say you are new to the trading game altogether and aren’t sure how to begin. A fantasy stock trading program can give you an opportunity to create an account with fake money – say, $10,000 worth – and enter trades in real time using actual financial data from real stock exchanges.

Naturally, you don’t actually own anything, but you can track your profits and losses just as you would with a real portfolio.

Where to Find Trading Simulations and Demos

These days, many online stock brokerages allow you to create training accounts and trade stocks using their platforms. TD Ameritrade, for example, is one of the most popular online brokerages and offers free practice account training. Demo accounts simply have become more and more popular because more and more individual traders want to get in on the action without risking their savings in the process.

You can also find online games that are intended to help you not only practice trading, but also learn more about the market and even compete against others. MarketWatch has one of the more popular free stock market games out there that is free to use and pretty handy for beginners.

For advanced traders who want to implement new strategies, your platform or brokerage probably already has an option for that – although some may cost extra. Still, the cost is more than worth it, since you can test drive an advanced metric strategy you’ve been wanting to try.

How to Get the Most Out of Stock Simulations

The best way to get the most out of stock simulations is to plan a strategy beforehand and develop a course of action for what you intend to do if/when you begin real-money trading.

After all, it is highly recommended that you go into stock trading with some kind of preset strategy. Traders who don’t approach the process with a formula usually don’t trade successfully. Warren Buffet, for example, has a set list of criteria that he uses when choosing his stocks, and he goes for long-term, undervalued investments. Day traders using range trading have set metrics, pivot points, and price ranges that they implement.

After you have a basic idea of what strategy you would like to implement, find a program that is not only free, but gives you access to metrics and real-time data. This is crucial; you want to use actual performance data from the market, from companies you are actually interested in, so you can get an immersive experience. Sometimes, this entails actually joining an online brokerage, which may require an initial deposit but doesn’t put that deposit at risk.

Another cool feature of some practice trading programs is the ability to backtest your trading strategies. In other words, you can take your strategy and simulate it against past historical data to see if you can gain any useful insight or trading signals/indicators from the results. Of course, you can’t use backtesting to predict future conditions (we haven’t developed clairvoyance yet), but you can use backtesting with practice trading accounts to test the validity of your approach. This is one tactic a lot of savvy investors use – and a lot of unsuccessful ones don’t.

In short, even if you are an experienced investor, it pays to use free stock simulation accounts and try out fantasy trading. I highly recommend that beginners open up an account and begin trading as they learn. Especially learn how to diversify your portfolio so you can see the wisdom of that approach over a long-term basis.